Forty years of Chinese beverage: there are victories and defeats, and the war has not stopped

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during the Sino foreign beverage war.

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So far, no local Chinese beverage can match the Jianlibao. This carbonated beverage, born in 1984, has firmly occupied China’s urban and rural markets in the next decade, and set off a wave of entrepreneurship of Chinese food and beverage enterprises.

In terms of this national degree, the myth written by “Oriental magic water” can not even be compared with international beverage giants Coca Cola and Pepsi. But giants are by no means idle people. Liangle once flooded the seven armies and defeated the seven major state-owned soda plants in China. The old soda was either merged or hidden or lost the opportunity, which was difficult to restore the market.

In the policy oriented merger wave in the 1990s, Chinese enterprises did benefit from the mature management experience and brand model of European and American enterprises, but they could not really become strong. In the past two decades (1990-2010) with the rapid expansion of consumers’ material demand, it is difficult for domestic brands to compete with overseas brands.

The swallowing of the market is not an instant, it is the result of hidden growth in long-term development. However, it is also fortunate that in the past two decades, made in China has been able to build today’s digital and intelligent advanced production line, and the concept, implementation and maintenance of the brand are gradually getting close to the right track, so that such a situation can break out.

From the day when “liangle” entered the customs, the development history of Chinese drinks has been ups and downs for 40 years. Reviewing several famous Chinese and foreign beverage wars, we can see not only the struggle and persistence of national brands, but also the unremitting sniping of giants against local enterprises. We try to go back to the worst defeat and divide it into four stages to re describe the story of these 40 years.

Two music floods seven armies retreat
When the Oriental magic water kills
China Cola is not here yet
The beverage war is back

Liangle flooded seven armies retreat

This is the first lesson for foreign-funded enterprises to local enterprises.

In the 1990s, under the guidance and encouragement of policies such as opening to the outside world and exchanging market for technology, some local enterprises complied with the wave of joint ventures with foreign capital. This wave of cooperation surged from the cosmetics industry to the food and beverage industry, and then extended to the 3C field of household appliances.

This is where the story of “two pleasures drowning the seven armies” happened. Two international giants ate seven of the eight old state-owned carbonated beverage manufacturers. In 1983, the sales of these eight soda plants, including Chongqing Tianfu Cola, Guangzhou Asian soda, Beijing Arctic Ocean, Shandong Laoshan cola, Henan Shaolin cola, Shanghai zhengguanghe, Shenyang Bawangsi and Tianjin Shanhaiguan, accounted for 42% of the total sales in China.

(geographical map of China, photo source: poor tour)

According to the description of Zhao Xinli, Huang Shengmin and Zhang Chi in the forty years of Chinese brands (1979-2019) [1], before liangle “entered the customs”, the former Ministry of light industry was worried that once the market was liberalized, domestic drinks might collapse, so it designated eight major factories to cooperate with International Beverage giants.

Tianfu Cola, which started in Chengdu, Sichuan, is worth a lot of ink. It was the first real domestic coke in China. At that time, both “liangle” took a fancy to it. In its heyday, Tianfu Cola had 108 affiliated factories in China, with annual sales of more than 200000 tons and profits and taxes of more than 70 million.

In 1991, Coca Cola began to seek cooperation from Tianfu Cola. Li Peiquan, then general manager, pushed left and blocked right. Coca Cola’s conditions seemed harsh: the joint venture could only produce Coca Cola (but agreed to set up another factory to produce Tianfu Cola). Due to the failure to obtain the “imperial sword”, the cooperation pushed again and again.

PepsiCo seized the opportunity to enter into negotiations. Therefore, on January 18, 1994, Pepsi Cola signed a joint venture agreement with Tianfu Cola and held 60% of the shares. The soldiers did not cut their blood and pocketed them. They have gained a lot: first, affiliated factories all over the country, and second, sales channels covering the whole country.

After the cooperation was reached at that time, the competent department limited in the approval that the production and sales of Tianfu Cola shall not be less than 50% of the total output. Pepsi did the same in the first year, but then it began to decline. By 1996, the production share of Tianfu Cola, a joint venture controlled by Pepsi Cola, was less than 25%, far lower than the “red line” specified in the approval, and a large number of former Tianfu Cola managers were stripped off. After that, they fell into the situation of annual loss. [2]

(photo source: @ Tianfu Cola official wechat)

Looking from south to north, it’s not easy for Shanhaiguan soda in Tianjin. After Coca Cola and Shanhaiguan soda factory jointly established Tianjin Jinmei Beverage Co., Ltd., Jinmei was unwilling to provide ingredients to the township enterprises of the original factory. The factory can only manually allocate production, the quality is naturally uneven, and the reputation and sales volume are also plummeting.

In this wave of joint ventures, Laoshan Cola stopped production in 1997, the second factory of Wuhan Binjiang brand stopped production in the millennium, the Arctic Ocean and Asia Shashi were once hidden, and the trademark of Bawangsi was sealed for ten years. In addition to Shanghai zhengguanghe, almost all the important brands of the eight soda factories were destroyed.

What liangle valued in this way was the channel advantage of occupying soda plants all over China at that time. In “the fate of COFCO before and after Ninggaoning airborne in Beijing”, Wei Sanshui described Coca Cola’s desire for channels and the strength of building a distribution system.

In the United States, Coca Cola has the largest distribution network in China and is the distribution system second only to the postal system. For a long time, Coca Cola has relied on such a huge system to sell its products to more than 200 countries and regions every day, with a daily drinking volume of more than 1 billion cups, equivalent to the distribution volume of more than 40 million standard boxes, which is 48% of the world beverage market. [3] The original text is quoted from Wei Sanshui’s COFCO destiny before and after Ninggaoning airborne in Beijing, contemporary China Press, January 2006

However, local soda plants separated by geographical location did not collapse across the board. Coca Cola crossed the customs all the way, but was cut off in Qinling. Shaanxi people’s love for “Bingfeng” soda is unwavering, so Sanqin set meal has a name.

Of course, in the 1990s when liangle made a strong attack, almost no one in the local beverage market could compete with “liangle” except Jianlibao and Wahaha. Most old soda brands are either joint ventures, acquisitions or shares. Even if they regain control after the millennium, the road to revival is still a long way off.

Oriental magic water kill time

Ten years from the 1990s, Jianlibao’s market position has been established, and liangle has not been cheap from it.

One important reason is that Jianlibao skillfully swam along the border between energy drinks and carbonated drinks. You can say it was an orange soda or a sports drink – athletes can quickly recover their strength by drinking this orange liquid. Ouyang Xiao, a researcher at Guangzhou Institute of sports science, developed it and was watched by Li Jingwei, then director of Sanshui distillery in Sanshui County, Guangdong Province.

Before becoming the winery director, Li Jingwei was the deputy director of Sanshui County Sports Committee. In 1983, he went to Guangdong on business and bought a can of Coca Cola in a pop can. Suddenly, he had the idea of letting the winery produce drinks.

At that time, China’s beverage production line was simple, and the common packaging was the recycling of glass bottles with aluminum caps. In 1984, there was no completely local pop can manufacturer [5], and Sanshui distillery could not have such a production line. But Li Jingwei magically persuaded Pepsi Cola company in Shenzhen to contract for it.

Perhaps Pepsi didn’t take Jianlibao as an opponent at that time when all kinds of cola appeared frequently in the market. Jianlibao became famous at the 1984 Asian Football Association Guangzhou conference and the Los Angeles Olympic Games. The sales of that year exceeded 3.4 million yuan. When it was the most popular, Sanshui county was crowded with large trucks from all over the country, and a truck of Jianlibao’s approval was fired to 20000 yuan.

At the Sixth National Games held in Guangzhou in 1987, Jianlibao and Coca Cola fought hand in hand to win the title of “designated beverage” at the conference. Coca Cola offered 1 million and Jianlibao directly increased to 2.5 million. At that time, Jianlibao, which was already the largest beverage enterprise in China, won without suspense [6].

Coca Cola and Pepsi finally understand that they are rivals that can not be underestimated. The positive battle between Chinese and foreign enterprises at the National Games also made Jianlibao start to write the myth of “Oriental magic water”.

From 1984 to 1994, in the decade when Jianlibao dominated the beverage arena, “liangle” did not show its strength in time due to immature sales channels (not yet taking shares in the eight factories). The eight factories mainly focus on soda and Cola products, which seem to be separated from Jianlibao, which is “Sports functional”, while “Wahaha” focuses on purified water and fruit juice, and there is no pop can production line, It also avoids positive competition.

This is the best time in the Oriental magic water kill. On its 10th anniversary, Jianlibao announced its entry into the United States. They set up an office in New York and bought an office building in the Empire State Building for $5 million.

People are afraid of being famous, pigs are afraid of being strong. At the peak of Jianlibao, the issue of property rights has always been pending. In 1997, Jianlibao planned to be listed in Hong Kong. Sanshui municipal government refused to approve Li Jingwei’s team to take shares on the grounds of “no Hong Kong temporary residence permit, so it is not allowed to buy h original shares”. The contradiction between the two sides was torn to the surface. The decline of an enterprise will eventually turn to a turning point of fate due to system and management problems.

Chinese Cola did not arrive at

After Jianlibao’s popularity became weaker and the two music flooded the seven armies to dominate, domestic drinks did not recover the lost land, although the area was limited and the time was short.

New entrants learn from some experience – the moment when carbonated drinks burst into the mouth, this stimulation always seems to be closely connected with the passion and roar of sports. Whether Coca Cola or Jianlibao, they have become household names through the National Games. This time, new entrants are no exception [7].

On June 10, 1998, the first match of the world cup in France officially kicked off, and the live broadcast of CCTV is about to begin.

In the few seconds of the countdown to the broadcast, the slogan “very cola, very choice” was the first to win, which marked that Zong Qinghou’s expected “Chinese people’s own Cola” officially stepped on the stage of history.

Extraordinary Cola has cut through difficulties all the way, from 380000 tons of extraordinary series in 1998 to 620000 tons in 2001, accounting for about 12% of the national carbonated beverage market. Although it failed to beat Coca Cola, it has become increasingly flat with Pepsi in terms of individual items.

The important reason for Coke’s initial victory is to occupy the second and third tier cities and villages first. In the book “Benedictine Walker”, Zong Qinghou’s confidence in the strategy of “encircling the city from the countryside” was recorded in detail. In 1998, China’s rural consumer goods retail market expanded rapidly, with an increase of 10% that year, exceeding that of cities for the first time, and the rise of the whole beverage market in rural areas also exceeded that of the previous year by 16.9%. Although liangle has absolute occupation in the first tier cities, their tentacles have not penetrated into the countryside [8].

Li Yanjun, vice president of the Research Institute of Wahaha Academy of Food Sciences, remembers that in the nutrient solution workshop of the medical insurance company, the concentrated solution of very cola was successfully extracted after thousands of experiments. Since then, the products have been produced by Baili company in Hangzhou Xiasha base. Due to the lack of personnel, more than 20 employees have been transferred from Hangzhou cannery.

Since then, Wahaha, which has gradually established a dominant position in the market through bottled water, has spread extraordinary cola to more than 80% of rural sales channels by establishing a supply and marketing consortium to share benefits with dealers. The situation is completely open.

During this period, fenhuang cola, which was born in the same year as very cola, also had a short limelight. Starting from Chaozhou, Guangdong, the base camp, the company moved to southwest China and Sichuan, eating 8% of the national beverage market all the way with advertising offensive. In its heyday, fenhuang cola, which spent 150 million on TV advertising in 1999, was squeezed into the top four of cola, followed by liangle and extraordinary cola. Due to wrong prediction, its cash flow broke quickly and lived in the market for only three years. However, as a national brand, it was called “two giants and three teenagers” together with Jianlibao and extraordinary Cola [9].

If the end of the story stays here, Zong Qinghou may be able to clap hands with Li Jingwei. The myth of Oriental magic water is taken over by the Chinese “very Cola”, which sounds like a good ending. But the old brother can’t carry it anymore.

In 2002, Sanshui municipal government transferred 75% of Jianlibao’s shares to Zhejiang SDIC. Zhang Hai, 28, became the chairman of the group. Li Jingwei’s team has been completely out.

Also in this year, Coca Cola held a huge dealer communication meeting in Lanzhou Feitian hotel. COFCO Coca Cola Co., Ltd. Gansu Branch communicated with local dealers in full swing at the meeting, which marked that the world’s largest beverage company with 116 years of history officially entered the West.

Coca Cola is good at fighting tough battles in cities, but that doesn’t mean it can’t make up for its shortcomings in the countryside. The cooperation with COFCO is an excellent opportunity to give full play to its channel advantages. Lanzhou Daily reported on May 23, 2002 that Gansu Branch of COFCO Coca Cola Co., Ltd., which was established less than half a year ago, used wholesaler network resources, transportation resources and channel resources to spread products to various retail outlets at the fastest speed. This allows consumers to drink Coca Cola anywhere at any time.

In the following years, Coca Cola entered Hunan all the way, entered the northwest and went deep into Xinjiang. Various photography competitions, love sponsorship of college students and donations from hope primary school formed an image of “high-end internationalization and social responsibility” for this overseas brand.

A classic brand positioning problem is revisited here. Cola originated from American culture. At that time, very Cola went to the rural market, and its short-term sales can certainly go up. However, as long as the two musicians shop in the countryside, local consumers begin to have the question of “Shanzhai”, and their trust in very Cola will naturally shake.

Chinese coke doesn’t seem to be waiting for a good time.

In the first decade of the 21st century, the public is crying out for feeding high-end and international European and American brands, and their news habits and brand awareness are being developed the night before. At this time, China is in a period of rapid consumption growth, and the market needs a large number of players to fill the gap. At that time, Chinese enterprises lacked the overall planning of brand strategy and mature experience in company operation. In this vast decade, it was inevitable to be hit by the dimensionality reduction of European and American brands.

The beverage war is back

History is a cycle. Now there must be a war between Chinese and foreign drinks.

In the 1990s, when the media reported that “two pleasures flooded the seven armies”, Chinese consumers were in the primary stage of building confidence in domestic products. It just coincides with the climax of foreign investment. Multinational corporations are bold, and the differences at the infrastructure level make domestic brands have little power to resist. Even if the public has the emotional determination to revitalize the national industry, it is difficult for the industrial side to meet expectations in a short time, so that the end of the story can not help but sigh.

After nearly two decades of dormancy, there is a moment when consumers’ confidence in domestic products and the accumulation of industrial strength will climb to the high point again. Statistics show that since 2018, at least more than 10 brands of domestic beverages have sprung up, including Yuanqi forest, Hankou No. 2 factory, bestinme, Kelly one, etc.

(picture source @ Yuanqi forest official micro, with cutting)

The atmosphere began to be tense, which came from the concern of “liangle” for new opponents. A former Pepsi executive disclosed to 36 krypton that “vitality forest will be named at every important meeting in 2021”.

Before this subtle tension was picked to the surface, liangle seemed to have put pressure on his opponent.

According to the statement of Yuanqi forest, from 2018 to 2020, they have encountered a number of production interruption events, “once the production plan of the OEM is changed, the product production of Yuanqi forest will be disconnected.”

At the most intense time, the agent factory directly called Yuanqi forest, “all factories producing Yuanqi forest must shut down before 12 o’clock tonight.” The other party is the OEM of Yuanqi milk tea products and the affiliated factory of a major domestic beverage company.

It is reported that the boss of the international beverage giant personally called the OEM party and asked its OEM to immediately stop cooperation with Yuanqi forest. In his tone, he even said at all costs, “no matter how much damage is caused, it must stop production” [10].

Not only the OEM, but also the shortage of key raw materials has plunged Yuanqi forest into the dilemma of “out of stock”. Although sugar free track has existed for a long time, it is vitality forest that makes the market. One of the key raw materials is erythritol.

Previously, the supplier of erythritol was Shandong bowling treasure. The output of the enterprise on erythritol in 2020 is about 20000 tons, and the vitality forest eats most of it. It is reasonable that there are future and future, the price is appropriate, and the relationship should be very harmonious.

But bowling treasure has a special identity. He is the first fructose supplier of Coca Cola in China and once the only supplier of Coca Cola fructose syrup in China.

In 2008, the media reported that the title was “bowling treasure: get on the boat of Coca Cola and make a fortune of 2.2 billion in 12 years [11], and suggested that founder Liu Zongli was only one step away from his dream of listing after getting on the boat of Coca Cola. Sure enough, the company went public the following year. By 2015, bowling treasure won the “Coca Cola top ten Supplier Award”. The two contracting parties are closely linked.

Therefore, when the sugar free bubble water market was supported by the vitality forest, the giants decided to sell.

Later, the media contacted a person familiar with the erythritol supply chain. The other party revealed that Coca Cola and Pepsi Cola successively found bowling treasure and placed an order for this raw material around the Spring Festival in 2021, indicating that the formula was already in hand and was waiting for the opportunity [12].

Around March 2021, Coca Cola and Pepsi Cola’s sparkling water brands AHA and bubble launched 0 sugar drinks respectively. When Coca Cola began to look for sugar substitutes, bowling treasure was destined to be involved in the war and might be forced to stand in line.

It is not uncommon for suppliers to give priority to key customers. Large orders are the way to support enterprises. Even if it is cross domain, Tesla’s single car output can’t keep up when it starts, it’s also because OEM manufacturers should give priority to meeting the orders of traditional car companies.

However, an interesting discovery is that Jianlibao, the “Oriental magic water”, also helped when the vitality forest was in ruins. On the label of a citrus flavor bubble water in Yuanqi forest, the entrusted party is “Beijing Guangdong Jianlibao Beverage Co., Ltd.”.

In the past three years, from raw material erythritol to filling and bottle embryo on the production line, cutting-edge domestic brands have encountered many restrictions, and each step is very difficult. After Yuanqi forest was cut off again, Tang Binsen personally flew to the agent factory and failed to negotiate. After returning to Beijing, he directly sent a message to the executives——

We will build our own factory.

The iron curtain of the supply chain of international giants was finally pried open in the all-out efforts of cutting-edge brands. In July 2019, Yuanqi forest signed the contract for the first self built factory in Chuzhou, Anhui Province. There are not only sweetener suppliers such as Jinhe industry, but also beverage brands such as Dongpeng, and supporting enterprises such as Jiamei irrigation and Tenghui packaging to form the advantage of industrial chain agglomeration.

Yuanqi forest has made a good start for cutting-edge beverage brands. Just as Jianlibao inspired the first wave of Chinese beverage entrepreneurship, bestinme, ripe fruit and other cutting-edge brands have successively entered the bubble water market; The top brands of new tea drink, Xi tea and Naixue tea, also began to enter the bottled soda market; Veteran players nongnong Shanquan and Wahaha have never lagged behind, and even Yili, a dairy enterprise, has come to take a share.

More importantly, domestic soda brands have begun to restructure.

In 2002, China and PepsiCo made difficult negotiations. Asian soda brands, including the factory area, were taken back by Guangzhou Light Industry Bureau [13]. After Xiangxue Pharmaceutical Co., Ltd. acquired the brand, Asia Shashi finally woke up and had its own tmall flagship store in 2019; Although Wuhan Binjiang soda can’t come back in Coca Cola’s hands, the young team started a new stove and became famous as “Hankou No. 2 factory”.

As for Tianfu Cola, which originally cooperated with Pepsi, Li Pei, the original general manager, personally went from Chongqing to Shanghai to submit a letter of consultation at Pepsi’s China headquarters. Tianfu Cola finally recaptured the formula and trademark after 2010, and a war has achieved at least one stage.

In the old photo album of Tianfu Cola, there is a picture of a little girl with a little safflower holding Tianfu Cola that has drunk more than half. In the latest microblog of Tianfu Cola, they said they wanted to find the girl.

(picture source @ Tianfu Cola official wechat)

reference material:

[1] Zhao Xinli, Huang Shengmin and Zhang Chi, forty years of Chinese brands (1979-2019), social science literature press, may 2019

[2] Li Tong, the last Tianfu Cola, business · China business review, issue 3, 2009

[3] The original text is quoted from Wei Sanshui’s COFCO destiny before and after Ninggaoning airborne in Beijing, contemporary China Press, January 2006

[4] Shanhaiguan customs is a brand name, not a geographical “Shanhaiguan”.

[5] There may be a doubt here that in April 1981, the first Coca Cola bottling line was put into operation in Wulidian, Fengtai District, Beijing. This is the first Coca Cola bottling plant after the founding of new China, but it is not completely independent research and development, so it is not included in it.

[6] Wu Xiaobo, big defeat (Revised Edition), Zhejiang University Press, November 2013

[7] Wu Xiaobo, forty years of agitation: national enterprises 1978-2018, CITIC press, December 2017

[8] Wu Aiqi, Zong Qinghou: a walker, China Machine Press, November 2018

[9] The two giants are coke and Pepsi.

[10] Peng Qian, Qiao Qian, Yang Xuan, 2021 beverage War: Giants encircle and suppress the vitality forest, 36 krypton, 2021.9

[11] Cui Xinshuang, bowling treasure: getting on the boat of Coca Cola for 12 years to make a fortune of 2.2 billion, financial weekly, August 2008

[12] Zhu Kailin’s vigorous forest, growing up in one year is later, latepost, December 2021

[13] Hu Zhiyi and Zhou Meiyan, joy and sorrow of domestic coke: survival under the two music system, times weekly, September 2013

作者：李小歪；来源：BBB研究所（ID：gh_c21f49b602dc），转载已获得授权。

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Forty years of Chinese beverage: there are victories and defeats, and the war has not stopped

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